20181031-招商证券_香港_-China_Healthcare__PD-1_market_access_expert_call_takeaway_6页_554kb

China Healthcare: PD-1 Market Access Expert Call Summary

Core Content Overview

This report summarizes insights from a market access expert call regarding the marketing and reimbursement strategy of PD-1 inhibitors in China, with a focus on Merck's Keytruda and its competition from both multinational corporations (MNCs) and Chinese biotech firms.

Main Takeaways

• Market Access Strategy:

  • Keytruda and Opdivo (from BMS) were launched in China in 2018 and achieved sales of RMB190mn and RMB150mn respectively in 3Q18.
  • Merck is focusing on securing NRDL (National Reimbursement Drug List) coverage for Keytruda, particularly for 1L NSCLC and 2L melanoma.
  • If approved, Keytruda could be the only PD-1 approved for 1L NSCLC in 2019, giving it a competitive edge.
  • The expert anticipates that SMIA (State Medical Insurance Administration) will implement measures like designated pharmacy sales and mandatory biomarker testing to control the financial impact of PD-1 coverage.

• Reimbursement Strategy:

  • Merck is expected to pursue NRDL inclusion and local reimbursement opportunities.
  • The 17 oncology drugs included in NRDL in 2018 have triggered a more dynamic reimbursement update for innovative drugs.
  • If a new round of negotiations begins in 2019, Keytruda may gain NRDL coverage for 1L NSCLC and 2L melanoma by 2H2019.

• Market Share Expectations:

  • Keytruda and Opdivo are expected to capture 70% of the PD-1 market in China.
  • Chinese PD-1 drugs are projected to take 30% of the market, with Hengrui likely to occupy half of that share (i.e., 15%).
  • Other Chinese biotech firms may also have a chance to succeed, depending on their marketing and R&D capabilities.

• Competitive Landscape:

  • Hengrui has strong commercial capabilities and a differentiated product, making it a long-term threat to MNCs.
  • Beigene focuses more on differentiated indications and has a strong R&D team but less known marketing strategy.
  • Junshi has strong clinical data but lacks a commercial team.
  • Co-promotion strategies are being explored by MNCs, such as Keytruda with Lynparza (PARP inhibitor) and Levatinib (VEGFR inhibitor), but these are still in early stages.

• Pricing and Cost Considerations:

  • Chinese PD-1 drugs are typically priced at 70% of MNC drugs, but some may be priced at 50% or lower to gain market share.
  • Keytruda may benefit from TPS biomarker testing, which is less costly and more efficient than Opdivo's TMB testing, potentially improving its reimbursement prospects.

• Prescription and Usage Patterns:

  • Doctors in China often present patients with two options: imported and domestic PD-1 drugs, with patients choosing based on economic conditions.
  • Off-label use of PD-1 is guided by NCCN guidelines and overseas clinical trial results, unless there are no alternatives.
  • Drug sales ratio control is currently in place in Chinese hospitals, but may be relaxed in the future due to patient and government pressure.

• Companion Diagnostics (CDx):

  • In the US, Keytruda is approved based on TPS biomarker (≥50%), while Opdivo uses TMB.
  • In China, NHC recommends biomarker testing for PD-1 prescriptions, but does not specify which biomarker.
  • Keytruda's use of the Daco pharmDx platform is more efficient and cost-effective, potentially giving it an advantage if biomarker testing becomes mandatory.

Investment Ratings

Key Players and Outlook

• Keytruda (Merck):

  • Strong commercial team with 300-400 salespeople.
  • Expected to reach US$1.0-1.5bn peak sales in China.
  • Will focus on fixed dose (200mg Q3W) for 1L NSCLC, similar to the US.
  • May face high costs due to this dosing, but is expected to be accommodative in pricing to align with government priorities.

• Hengrui:

  • Expected to capture 15% of the PD-1 market in China.
  • Its PD-1 combined with Apatinib may offer improved efficacy and lower AE, making it a competitive threat if priced low enough.

• Junshi:

  • Engaged in co-development with other companies for combination therapies.
  • May face challenges in co-promotion due to coordination issues and pricing strategies.

Conclusion

The PD-1 market in China is highly competitive, with MNCs like Merck and BMS leading the charge. The government's push for innovative drug reimbursement and biomarker testing will play a critical role in shaping the market dynamics. While MNCs are expected to dominate with 70% market share, Chinese biotech firms are making significant strides, particularly Hengrui, which may capture 15% of the market. The success of PD-1 drugs will depend heavily on reimbursement policies, pricing strategies, and clinical data.